KYC is a process used by businesses and other organizations to verify their customers. It includes all the personal and professional information about the new onboarded client and customer. KYC ensures the organization works with a legal and safe individual and there is no harm or risk in dealing with him. Besides, the data mainly includes ID numbers, bills, and other official documents. This verification is done to investigate whether the customer has been involved in any criminal activity recently or in the past. In addition, KYC is used to help businesses prevent frauds like money laundering and other illegal thefts.
Steps Included in the Process
As KYC is a crucial process and it involves several steps to verify a new onboarded customer. Every organization has its way of verifying new customers and includes various steps in the process.
- The first step of the client digital onboarding process is to gather information like name, address, date of birth, and ID number. The customer will also have to fill out a form in which he has to write about his previous company, income, and other official information.
- All the provided documents will be then verified including ID cards, government-issued documents, bills, bank statements, licenses, and others.
- The customer is verified based on his background whether it is noble or was involved in any kind of criminal activity. This is a risk assessment process and is done to identify any potential risk related to the new onboarded customer.
- If the customer was found guilty of making unusual transactions and weak terms with the previous companies it means that the customer is of high risk.
- After the completion of all the prior steps. The account of the new customer is activated and is introduced to the company.
- The customer will be evaluated by online regular monitoring to check his day-to-day activities in the company.
KYC Onboarding Standards
Every business and other organization must follow specific rules and regulations regarding the kyc onboarding process. These standards are set to ensure better protection of both companies and clients.
Moreover, FATF (Financial Action Task Force) is an authoritative body that sets the standard for all companies to fight money laundering and terrorist financing. It allows the companies to do more checks on high-risk customers. Besides, it verifies the businesses of the customers to identify any suspicious activity prior to their action.
Furthermore, businesses are required to keep records of their customers at regular intervals. Employees should receive proper training on KYC rules so that they can follow them with responsibility. Apart from this, companies should also do audits to check whether KYC standards are met or not.
Challenges Faced During the KYC Onboarding Process
Although the process is highly beneficial for the companies it also faces certain challenges that need to be addressed soon. As the system has a lot of data stored to gather all the data of each individual with care, takes time. Besides, there are various rules and standards to follow for different countries, it becomes difficult for companies located in different countries to know what standards they are supposed to follow.
Moreover, the data of customers should be protected with care. It is a first and foremost concern of all the employees and customers that their data should not be misused. If it is done, then it can lead to the mistrust of the customers in the whole system.
KYC Onboarding and Biometric Verification
Biometric verification is a process in which a person is verified based on his physical and behavioral characteristics. It involves fingerprint verification, facial recognition, iris and retina scan, and voice verification. In KYC, this process helps businesses to verify their customers in a better way. Their sample (fingerprint, face, etc) is collected and stored in the system. When they appear in front of the system, it verifies by comparing the features from a large database and allows access.
Besides, this process is being used in several institutions such as banks. It helps them to verify individuals and allows only the rightful owner to make transactions. In this way, it becomes difficult for the scammers to steal biometric features.
Conclusion
KYC customer onboarding is a crucial step toward the safety and protection of businesses, especially financial sectors. This process makes sure that companies and clients are not involved in any illegal activity. No doubt there are several loopholes that it faces but over time the process will evolve and enhance with the integration of other technologies like biometrics and AI verifications. Companies and businesses must stick to any possible advancements in the process of KYC to promote authenticity, safety, and trust specifically in financial sectors.